A company produces a product along with the production function Q = K^0,5L^0,5 w

Question

A company produces a product along with the production function Q = K^0,5L^0,5 where Q stands for number of produced units., K stands for the amount of capital units and L for the amount of labor units.The price for every unit labor is w = $4 and the price per unit capital, r is = $1.

a) Use the Lagrange-method to calculate the maximal production given that the cost is $128. How many units of capital and labor will the company use?

b) Visualize the solutions by drawing a graph for the Isoquant for the maximal number of produced units and the Isocost-line. Draw K on the vertical axis and L on the horizontal

Explanation / Answer

A company produces a product along with the production function Q = K^0,5L^0,5 w

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